“We’re cutting 60% of the workforce in one month.”
That message was delivered to a friend during a company town hall meeting. Each person sitting there suddenly knew it was more likely that they wouldn’t have a job in the near future.
Fast forward 1 month.
“Arrive at 8:00 am tomorrow, you’ll be called in for a 15-minute meeting at some point during the day.” In these 15-minute meetings, each employee would find out their fate. It was like being asked to wait patiently in line for the executioner.
Unfortunately, my friend’s experience is not uncommon. According to Crunchbase News, more than 100,000 workers in US based-tech companies were let go in mass layoffs during the first two months of 2023.
This is the best way to crush psychological safety for your entire workforce.
Even those who stay, the “lucky ones”, will no longer trust your company. They will be anxious about the stability of their own jobs. Actions speak louder than words. With a mass layoff, leadership has shown that they don’t value their workforce and aren’t committed to them.Research shows that mass layoffs don’t have the desired outcome. Companies that slash their workforce end up being less profitable than companies that use other ways to reduce costs during hard times.
Why don’t mass layoffs have the desired impact?
A company’s market value used to be closely tied to its tangible assets: machines, physical plants, buildings, inventory, cash, and investments. In 1975 tangible assets comprised 83% of the S&P 500 market value, while intangible assets accounted for the remaining 17%. By 2015, the percentages flipped, with intangible assets accounting for 84% of market value.
The complete reversal of market value contribution goes to show that people, human beings, are the greatest driver of corporate value. They create other intangible assets, like patents and brand equity. When times are hard, cutting your most valuable asset doesn’t make sense.
Sometimes layoffs are the only option. But companies today aren’t using it as the option of last resort. Did they already cut executive pay? Did they try unpaid leave? Did they enlist their entire company to innovate new options for cost reduction and sales growth?
Your employees are your most valuable asset.
Treat them that way.
You cannot win without them.